UPDATE 1-Alibaba invests $692 mln in Chinese department store operator

Mon Mar 31, 2014 12:11am EDT

* Alibaba to buy $214 mln of Intime Retail shares, $478 mln in convertible bonds

* Purchase adds to more than $2.7 bln of deals from Alibaba in recent months

* Alibaba, Intime Retail to launch online-to-offline venture (Adds details of Alibaba investment, IPO plans, recent m&a activity)

By Elzio Barreto

HONG KONG, March 31 (Reuters) - China's Alibaba Group Holding Ltd agreed to invest $692 million in a Chinese department store operator as the e-commerce giant looks to bring the benefits and convenience of online shopping to customers who visit real bricks-and-mortar stores.

Alibaba, whose businesses will come under investor scrutiny ahead of the group's planned mega IPO in the United States this year, said it will buy $214 million worth of shares in Hong Kong-listed Intime Retail (Group) Co Ltd.

It also agreed to acquire $478 million of convertible bonds, which would give Alibaba a 26.1 percent stake in the department store operator once the bonds are converted into shares in three years.

In recent months Alibaba has gone on a shopping spree, spending more than $2.7 billion to expand into media, chat services and mapping technology.

The expansion has encroached on the turf of social networking giant Tencent Holdings Ltd, which has in turn made inroads into Alibaba's territory with its partnership with China's No.2 online retailer JD.com.

The purchases come as Alibaba starts its preparations for an initial public offering set to be the biggest-ever technology listing, surpassing Facebook Inc's $16 billion listing in 2012.

Intime will issue 220.54 million shares at HK$7.5335 each and HK$3.71 billion worth of convertible bonds to a unit of Alibaba, the department store operator said in a filing to the Hong Kong stock exchange on Monday.

As part of the investment, Alibaba and Intime will form a joint venture to develop online-to-offline, or O2O, business in shopping malls, department stores and supermarkets in China. Alibaba will own about 80 percent of the venture, with Intime controlling the rest.

O2O businesses seek to benefit from the meteoric rise of smartphone use in China and can help turn a search into a shopping trip or meal based on the user's location.

Shares in Intime surged as much as 17 percent shortly after the market open on Monday, following a trend of Hong Kong-listed companies whose shares gained sharply after receiving investments from Alibaba.

The gains were short-lived, with Intime reversing course and losing as much as 11.4 percent by mid-morning as investors digested details of the purchase, in which Alibaba offered to buy the stock at a 13.7 percent discount to its last traded price on March 26.

Appliance maker Haier Electronics Group Ltd soared 20 percent in December after Alibaba unveiled plans to invest $361 million.

ChinaVision Media Group more than tripled earlier in March after Alibaba agreed to buy a controlling stake for $804 million to gain access to TV and movie content. ($1 = 7.7573 Hong Kong Dollars) (Additional reporting by Donny Kwok and Paul Carsten in Beijing; Editing by Christopher Cushing and Ryan Woo)